Another major retailer cracks down on self-checkout at its stores

Huge retail chains like Walmart  (WMT) , Target  (TGT) , CVS  (CVS) and others have faced a high amount of retail theft, or what they call inventory shrink, since 2020 and have been implementing measures to eliminate those costly losses.

Among the most common measures used by Walmart, Target and some others has been locking up popular items behind glass cases to prevent shoplifting. Customers shopping at these stores have encountered a lot of their favorite products, such as cosmetics, shampoo, over-the-counter drugs and even laundry detergent locked up in those cases.

Related: Target limits self-checkout, makes a change customers will love

Shoppers need to either push a button near the product to alert a worker to unlock the case or, in some situations, run around the store looking for a worker with the proper key to open the case. It's a very inconvenient problem for shoppers, and not all stores are consistent with their lockup policies.

For example, one Walmart store might lock up some of their instant coffee products, while another cross-town Walmart location, or even a Target competitor, doesn't lock up any coffee.

Retail stores have also implemented new self-checkout rules to discourage inventory shrink, but again, stores are inconsistent with their rules. Walmart stores have a 20 items or less rule for their self-checkout lanes to try to steer shoppers with more items to checkout clerks that might help reduce the occurrence of theft. But neither customers, nor workers seem to be observing that rule. Target on March 17 implemented a new 10 items or fewer rule in its self-checkout lanes, but we'll see if anyone enforces it.

These self-checkout requirements are also supposed to speed up the checkout process, but that only works if all the self-check registers are working and an adequate amount of checkout clerks are working registers as well.

The next step for retailers in addressing inventory shrink at self-checkout would be to eliminate self-check altogether.

Five Below cuts back on self-checkout lanes 

After finishing the fourth quarter of 2023 with a "higher-than-planned shrink," or higher level of theft than expected in its stores, value retailer Five Below  (FIVE)  has implemented associate-assisted checkout in all of its stores for 2024, CEO Joel Anderson said on the company's earnings call on March 20.

"In addition, in our high-shrink stores, the primary option for checkout is more of the traditional, over-the-counter associate checkout," Anderson said. "We expect to have 75% of our transactions chain-wide assisted by an associate with a goal of 100% in our highest shrink, highest-risk stores to be fully transacted by an associate."

The retailer also checks receipts and adds guards

"Additionally, in those stores, we’re implementing further mitigation efforts, including receipt checking, additional store payroll and guards. We intend to measure progress as soon as Q2 when we perform a limited number of store counts," Anderson said.

Five Below tested several inventory shrink mitigation initiatives late in the third quarter and into the fourth quarter of 2023, which included product-related tests, front-end initiatives and guard programs, Anderson said in the earnings call. He said the most significant change the Philadelphia-based company made across most of the chain was to limit the number of self-checkout registers that were open, while positioning an associate upfront to further assist customers.

Anderson said he is confident the company's measures will help it over time, but the company has not included any financial impact for shrink reduction in its 2024 guidance. The company, however will aggressively pursue returning to pre-pandemic levels of shrink or offsetting the impact over the next few years, he said.